M-Club - Reforming Legal Services in France

More that 60 lawyers, regulators and academics gathered at a Law Society conference in June, to discuss radical plans to reform the French legal profession. Richard Parnham analyses the possible international implications of the French proposals..

It was, perhaps, a brave decision for Jean Michel Darrois, senior partner of French law firm Darrois Villey Maillot Brochier, to adopt a distinctly “Gaullist” rhetoric in his recent speech, delivered at a meeting of the Law Society of England and Wales. In explaining the reasons for his investigation into the French legal profession, Mr Darrois could have claimed that his proposals would help the French legal market to become more “consumer friendly”, as David Clementi had done in his 2004 report into the English and Welsh legal professions. Instead, Mr Darrois said his proposals were intended to give French law firms the money, resources and expertise to compete with their Anglo Saxon rivals. This, in turn, would allow French law to become more prevalent, internationally. Ironically, his speech was delivered to an audience which largely comprised of English lawyers - several of whom worked for law firms operating in France.

Nevertheless, despite the overtly nationalistic justification for his proposals, much of what Mr Darrois said is likely to be welcomed by international legal practitioners – not least because they would bring French legal ethics closer into line with their own national codes. For example, his proposal to allow private practice lawyers who go in-house to remain as members of their local bar would be particularly welcome by corporate counsel from Anglo Saxon jurisdictions, where such arrangements are already commonplace. Likewise, his suggestion that law firms should be able to identify clients – with their consent - in firms’ promotional publicity will almost certainly be helpful to international legal practised operating in France. Globally, such firms often promote their industry-specific expertise by way of reference to transactions they have advised on.

Of course, with any reform proposals, the devil is always in the detail. And, inevitably, Mr Darrois’ proposals in relation to in-house lawyers came with one important caveat.  Unlike their Anglo-Saxon equivalents, Mr Darrois was not proposing that French inhouse lawyer would enjoy full rights of audience in either the higher French courts, or in administrative hearings. In explaining his thinking for this, Mr Darrois freely admitted this exception was designed to head-off complaints from private practice lawyers’ unions, who would inevitably oppose greater competition. And, as if to confirm this hostility, Dominique Voillement, director of the Brussels delegation of the French Bars, told the meeting that there was “great hostility at base camp” to this proposal.

In reality, private practice lawyers should have reason to fear Mr Darrois’ proposals.  While there are around 48,000 private practice lawyers working in France, Mr Darrois has previously estimated that a further 8,000 and 40,000 legal practitioners are inhouse.  Of course, not all of these individuals would be eligible – or interested – in becoming members of their local bar, even if allowed to. By way of example, today, the – voluntary - French Association of Company Lawyers only has around 3,000 individual members. However, the incorporation of even a small percentage of the French in-house legal community into their local bar membership would considerably alter the balance of power between the two sides of the profession.  In giving his own presentation to the event, Mickaël Laurans, from the Law Society of England and Wales, pointed out that the ability to join their local bar would probably have a direct impact on the 60 or so English in-house lawyers working in France. At present, these individuals were treated as “lawyers” by the English and Welsh regulators, he said, but as “non-lawyers” by their French equivalents. But, as Mr Laurans then added, if implemented, Mr Darrois’ proposals might mean these individuals might be subject to both English and French ethical codes - as well as an obligation to pay registration fees to their local French bar. Therefore, it is easy to understand why some English lawyers working in French companies might be perfectly happy to continue to be ignored by the French legal establishment, as they are now.

Besides the 60 individuals mentioned by Mr Laurans, the Darrois proposals may also have wider implications for the European in-house legal profession in general. At present, there is a stark division between those European countries who allow inhouse lawyers to become bar members, and those who do not. And, because of this lack of a common position, the European Commission effectively treats all in-house lawyers in Europe as “non-lawyers” - whatever their actual status in specific countries. The practical implication of this situation is that Europe’s in-house lawyers cannot claim legal privilege for the documents they work on, if subject to an EU competition law investigation.

At present, the Akzo Nobel test case on whether in-house lawyers should be granted legal privilege in EU competition cases is awaiting final judgment in the European Court of Justice (ECJ). In its September 2007 preliminary judgment, the ECJ use the continued lack of unanimity within Europe’s bars over the status of in-house lawyers as one of its justifications for denying them privilege. Yet, because Darrois may push France from is current “anti in-house lawyer” position to being “pro-in-house lawyer”, the dynamics of this debate could well change, even before the final judgment is eventually delivered. Certainly, it is possible that the CCBE, Europe’s officially recognised group of national European bars, will become less ambivalent about inhouse lawyers’ generally, if its French delegation changes its policy as a consequence of the proposed Darrois reforms.

Mr Darrois also suggested that, in future, lawyers, notaries and accountants might be able to form fully-fledge multidisciplinary partnerships (MDPs) – to the extend that they would even be allowed to share fees and profits. He told the meeting that a “rapprochement” between lawyers and accountants should be encouraged, not least because many spent so much of their time in each others’ company. “Lawyers and accountants work together on a day to day basis,” he said. “You can’t have one without the other.” In reality, it should come as no surprise that the Commission came to this pro-MDP conclusion. One of the Commission’s members is Henri Nallet, a former French justice minister. In 1998, Mr Nallet wrote a report on MDPs for the French government, saying that banning MDPs in France would be “out of the question.”

Although, at first hand, Mr Darrois’ MDPs proposals seem fairly significant, it is possible that practical implications of such a liberalisation would be relatively minor.  Unlike countries such as the US or Germany, which aggressively protect lawyers’ monopoly provision of legal services, several different professions in France – most notably the accountants - have long been able to advise on legal issues which are “incidental” to their own areas of expertise. As a result, three out of the four “Big Four” accountancy giants now operate substantial legal practice in France -  albeit operating as standalone entities for regulatory purposes.

For these firms, one of the most important changes brought about by Mr Darrois’ proposal would be an increased level of transparency. At present, the exact relationship between “side by side” lawyer and accountancy practice is normally one based on a private contract, and therefore not open to public scrutiny. Under Mr Darrois’ proposals, all entities which effectively operated as law-related MDPs would have to declare the exact nature of their organisation, including how fees are divided, to their respective regulators. In addition, Mr Darrois also calls for greater regulation of all entities who offer “incidental legal advice”. Here, the intention is to create a level regulatory playing field between any lawyers – who are governed by a code of ethics and other professional obligations - and non-lawyers, who generally are not.

Internationally, Mr Darrois’ MDP proposals may also be significant. This is because the Darrois proposals represent yet another move away from Europe’s previously-hostile MDP stance, as laid out in the 2002 ECJ Wouters ruling. In Wouters, the ECJ of Justice refused to overturn a ban imposed by the Dutch Bar on MDPs between lawyers and accountants, saying it was up to member states to decide whether or not MDPs should be permitted.

At the time, traditionalists viewed the Wouters ruling as an anti-MDP victory. In fact, events since this time have proved that the opposite is true. Given the ECJ’s blessing to devise their own MDP policy, several of the largest EU countries quickly opted for liberalisation. With Germany already long-time advocate of MDPs for historical reasons, first the English, and then the Italian governments changed their laws to specifically allow MDPs between lawyers and other professionals – although how MPDs will actually be implemented in practice remains unclear in both countries. Now, with the possibility that France will also follow suit, it appears that, as a continent, Europe will soon become overwhelmingly pro-MDP, in terms of its regulatory framework.

Another area in which Mr Darrois’ proposals may have international implications is in relation to its proposals to allow for inter-professional cooperation. Compared with the relatively homogenous US legal market, Europe’s legal professions are highly fragmented, with many different groups engaged in endless “turf wars” for supremacy. As a consequence, in France, as in many other European countries, it is often difficult for members of one legal profession to join another - even within the same country. This is often because each of the profession’s ethical standards and training obligations are unique, and also because experience gain in one legal profession often does not count if a legal practitioner wishes to join another.

In fact, Mr Darrois explicitly rejected one idea to overcome this challenge – the fusion of the French legal and notary professions. Instead, he envisaged that, in future, it should be far easier to join one French legal profession, after previously having qualified in another. Explaining their collective thinking on this issue, fellow Darrois Commission member, Professor Laurent Aynes, told the London meeting that the Commission wanted France’s legal specialists to be able to move “seamlessly” between the various legal professions. To achieve this objective, a period of common professional training should be developed, he added, administered by a new central training regulator. “We don’t want uniformity between the professions, but we do want them to be united,” he said.

Summary

If implemented, the various reform proposals suggested by the Darrois Commission would go a long way to bring French lawyers’ ethical codes in line with modern business practices. Some of the Commission’s proposals – especially those relating to the status of corporate counsel and lawyers’ advertising – will do no more than allow the French legal market to pay “catch up” what is already accepted practice in many other countries. And, in relation to their ownership and management liberalisation proposals, the Darrois Commission’s ideas are ambitious, but not completely revolutionary. More positively, the proposals to co-ordinate the various legal professions in France will go a long way to make the market less confusing to outsiders, who are not used to the sheer number of different legal “professions” operating in the country.

The Darrois reforms are arguably also important for another reason. Internationally, many traditionalists have long criticised Anglo Saxon law firms for being imperialists, and treating law more like a business than a profession. Yet, Mr Darrois’ proposals indicate that this criticism is no longer valid. With Italy, and now France, proposing or introducing market-based reforms to their legal professions, the international legal market is likely to become ever more “business” like – with many different European countries now pushing the reform agenda.

As a result, any legal profession around the world that may previously have considered themselves safely “off the radar” in terms of interest from Anglo law firms may now have to think again. If Mr Darrois’ reforms are introduced as planned, French firms may well become increasingly expansionist in the future. And any country with historical, political or economic ties with France could well be the target for any resulting French law firm expansion. Therefore, any country that feels that it could become a target for future French expansion will have to decide – now – how it will react to this potential new challenge - before it is too late.

Last updated - 24 September 09

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